GAMAFA

Handout litrendshoe.co
GABRIELLA JASMINE - CEO
Market Types FADILAH ALDO ALIMUDIN - COO
GABRIELLA AURELIA N.O. - CFO
MARIA MONICA HILLERY M.A. - CMO

Context
In the previous activity, you learned the differences between a customer and a consumer. Here, you will
understand the different types of markets with the help of a class discussion.

Instructions
1. This is a class discussion.
Foundational Course in Entrepreneurship

2. Go through the 4 market types explained in this handout. You get 10 mins for this.
3. Then, read through the scenarios and identify the market type for each.
4. Discuss the scenarios given at the bottom of this handout.
5. The class discussion will be for 20 minutes.

What makes ventures succeed or fail? According to Steve Blank, “90% of ventures fail due to self-destruction
and not competition”. Entrepreneurs need to evaluate a few options based on market size and decide the type
of venture they want to start and their risk-taking appetite.

It is important that you understand the type of market you choose for your venture. The market type you
choose will impact multiple aspects of your business including:

 Market size
 Sales model
 Funding necessary for the venture
 Customers and how much time will it take to adopt them
 Competition
 Risks

Not knowing what type you can cause challenges in future. Moreover, the market you choose will determine
the type of venture you are. Take a detailed look at each market type.

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 Handout
Market Types

1. Existing Market
When investors and entrepreneurs go after an existing market – the advantage is that there’s little or no
market risk. In this market type:

 Competitors exist
 Customers want and need better performance
 Technology is usually the driving factor
 The positioning is driven by the product and how much value customers place on its features
Foundational Course in Entrepreneurship

 The risk is to think that competitors are dumb or too slow

 There is no "chasm" that you need to fill. The chasm is the gap between early adopters and the mainstream
customers in a market.

2. New Market
In this market type:

 Customers do not exist in the present, so revenue generation takes years

 Market size is zero
 Customers need to be made aware of their needs
 You must consider what factors can you create that has never been offered
 The chasm is biggest here because you will only be selling to the very early adopters

For a new market to take off, there are many things that you need to consider. For example, who is the
customer? and what customer pain/problem are you trying to solve?

3. Re-segmented Market
The Re-segmented market is a hybrid between a New market and an Existing market in the sense that it is a
New Market created from a small segment from an existing market.

The features of this market type are:

 Low cost
 New Niche

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© Wadhwani Foundation For Students’ Use
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 Handout
Market Types

In this market type:

 Evaluate factors that your industry has long competed on and eliminate those
 Evaluate what factors can be reduced well below the industry standards
 Evaluate what factors can be increased above the industry standards
 Evaluate what factors can be created that have never been offered
 There is a bit of a chasm in this type of market
For example, Southwest airlines took on the airline industry by bringing up the traditional hub-and-spoke
model and providing just very limited services but for an extremely low price.
Foundational Course in Entrepreneurship

4. Clone Market
In a Clone market, customers are known because you copied an existing market. It is called a Clone because, in
this market type, you are going to localize all those specific issues for your country or region. That said, it takes
a foreign business model and adapts it to local conditions.

There are no competitors if you are the first one and the risk may be in misjudging the local needs. This market
type:

 Adapts a foreign business model to a local condition (language, culture, import restrictions, and local
regulations)
 Needs a large number of customers, typically >100 million

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© Wadhwani Foundation For Students’ Use
www.nen.org V01
 Handout
Market Types

Here’s a snapshot of the 4 market types:

Market Are the What does the Associated Risks Competitors Examples
Type Customers Customer
known? Need?
Lack of branding,
Existing Market Known Performance Many Amazon
sales & distribution

Re-segmented Possibly Market and product

Better Fit Many Southwest
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Market known re-definition

Transformational Evangelism and

New Market Unknown None Groupon
improvement education cycle
Possibly Misjudging local
Clone Market Local version None Baidu
known needs

Source: https://guides.co/g/how-to-build-a-startup/3017

Are you now clear about the different market types? Look at these scenarios. Which market type are these?
Your facilitator will run a class discussion around these scenarios.

Scenarios
1. Care.com: It is an online marketplace to find babysitters. What kind of market is it? Resegmented market
2. Chewy.com: It is an e-commerce company for pet food. What kind of market is it? Existing market
3. Amazon: It started out selling books. What kind of market is it? Existing market
4. Globaltranz: It is an online freight broker for trucking capacity. What kind of market is it? Resegmented market
5. SpaceX: SpaceX designs, manufactures, and launches advanced rockets and spacecraft. What kind of
market is it? Existing market
6. Twitter: Twitter ventured into micro-publishing. What kind of market is it? Resegmented market
7. Groupon: It is in the daily deals market. What kind of market is it? New Market

Here are some more links for you to explore:

1. https://steveblank.com/2015/01/06/there-are-4-types-of-startups/
2. https://www.youtube.com/watch?v=1RTcXwJuCaU
3. https://steveblank.com/category/market-types/
4. https://www.mentormob.com/entrepreneurship/consumer-web-entrepreneur/market-
types/resegmented-market

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